DEPARTMENT OF HEALTH & HUMAN SERVICES Office of Inspector General
Washington, D.C. 20201
March 21, 2011
The Honorable Greg Abbott
Office of the Attorney General
State of Texas
P.O. Box 12548
Austin, TX 78711-2548
Dear Mr. Attorney General:
The Office of Inspector General (OIG) of the U.S. Department of Health & Human Services
(HHS) previously received your office’s request to review the Texas False Claims Act, Tx. Hum.
Res. Code Ann. §§ 36.001 through 36.132, under the requirements of section 1909 of the Social
Security Act (the Act) and determined that the Texas False Claims Act met those requirements.
Section 1909 of the Act provides a financial incentive for States to enact laws that establish
liability to the State for individuals and entities that submit false or fraudulent claims to the State
Medicaid program. For a State to qualify for this incentive, the State law must meet certain
requirements enumerated under section 1909(b) of the Act, as determined by the Inspector
General of HHS in consultation with the U.S. Department of Justice (DOJ). As explained below,
we have determined, after consulting with DOJ, that the Texas False Claims Act no longer meets
the requirements of section 1909 of the Act.
On May 20, 2009, the Fraud Enforcement and Recovery Act of 2009 (FERA) made numerous
amendments to the Federal False Claims Act, 31 U.S.C. §§ 3729-33. On March 23, 2010, the
Patient Protection and Affordable Care Act (ACA) amended the Federal False Claims Act. Also,
on July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-
Frank Act) further amended the Federal False Claims Act. These three acts, among other things,
amended bases for liability in the Federal False Claims Act and expanded certain rights of qui
tam relators. As a result of the FERA, the ACA, and the Dodd-Frank Act, the Texas False
Claims Act is no longer in compliance with section 1909 of the Act. OIG also identified an
additional provision in the Texas False Claims Act that does not satisfy the requirements of
section 1909 of the Act.
Section 1909(b)(1) of the Act requires the State law to establish liability for false or fraudulent
claims described in the Federal False Claims Act with respect to any expenditure described in
section 1903(a) of the Act. The Federal False Claims Act, as amended by the FERA, establishes
liability for, among other things:
knowingly presenting, or causing to be presented, a false or fraudulent claim for
payment or approval (removing the requirement that the claim be presented to an
officer or employee of the Government);
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knowingly making, using, or causing to be made or used, a false record or statement
material to a false or fraudulent claim;
conspiring to commit a violation of the Federal False Claims Act; and
knowingly making, using, or causing to be made or used, a false record or statement
material to an obligation to pay or transmit money or property to the Government, or
knowingly concealing or knowingly and improperly avoiding or decreasing an
obligation to pay or transmit money or property to the Government.
See 31 U.S.C. § 3729(a). Relevant to the above-described bases for liability, the Federal False
Claims Act, as amended by the FERA, includes an expanded definition of the term “claim” and
defines the terms “obligation” and “material.” See 31 U.S.C. § 3729(b). In contrast, the Texas
False Claims Act does not establish liability for the same breadth of conduct as the Federal False
Claims Act, as amended.
Section 1909(b)(2) of the Act requires the State law to contain provisions that are at least as
effective in rewarding and facilitating qui tam actions for false and fraudulent claims as those
described in sections 3730 through 3732 of the Federal False Claims Act. The Federal False
Claims Act, as amended by the FERA and the Dodd-Frank Act, provides certain relief to any
employee, contractor, or agent who is retaliated against because of lawful acts done in
furtherance of a Federal False Claims Act action or efforts to stop violations of the Federal False
Claims Act. See 31 U.S.C. § 3730(h). The Texas False Claims Act does not provide these
persons with as much protection from retaliatory action. Therefore, the Texas False Claims Act
is not at least as effective in rewarding and facilitating qui tam actions as the Federal False
Claims Act.
In addition, the Federal False Claims Act, as amended by the FERA, provides that for statute of
limitations purposes, any Government complaint in intervention, whether filed separately or as an
amendment to the relator’s complaint, shall relate back to the filing date of the relator’s
complaint, to the extent that the claim of the Government arises out of the conduct, transactions,
or occurrences set forth, or attempted to be set forth, in the relator’s complaint. See 31 U.S.C. §
3731(c). In contrast, the Texas False Claims Act does not contain a similar provision.
Therefore, the Texas False Claims Act is not at least as effective in rewarding and facilitating qui
tam actions as the Federal False Claims Act.
In addition, the Federal False Claims Act, as amended by the ACA, provides that the court shall
dismiss an action or claim under the Federal False Claims Act, unless opposed by the
Government, if substantially the same allegations or transactions as alleged in the action or claim
were publicly disclosed: (1) in a Federal criminal, civil, or administrative hearing in which the
Government or its agent is a party; (2) in a congressional, Government Accountability Office, or
other Federal report, hearing, audit, or investigation; or (3) by the news media, unless the action
is brought by the Attorney General or a person who is an original source of the information. See
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31 U.S.C. § 3730(e)(4)(A). In contrast, the Texas False Claims Act requires a court to dismiss a
broader category of cases based on a public disclosure and does not give Texas the opportunity to
oppose the dismissal. Therefore, the Texas False Claims Act is not at least as effective in
rewarding and facilitating qui tam actions as the Federal False Claims Act.
Further, the Federal False Claims Act, as amended by the ACA, defines “original source” as an
individual who either: (1) prior to a public disclosure, voluntarily disclosed to the Government
the information on which the allegations or transactions in a claim are based or (2) has
knowledge that is independent of and materially adds to the publicly disclosed allegations or
transactions, and who has voluntarily provided the information to the Government before filing
an action. See 31 U.S.C. § 3730(e)(4)(B). In contrast, the Texas False Claims Act has a more
restrictive definition of “original source.” Therefore, the Texas False Claims Act is not at least
as effective in rewarding and facilitating qui tam actions as the Federal False Claims Act.
In addition, the Federal False Claims Act provides that in addition to a percentage “of the
proceeds of the action or settlement of the claim,” the relator shall receive an amount for
reasonable expenses, plus reasonable attorneys’ fees and costs, to be awarded against the
defendant. See 31 U.S.C. § 3730(d)(1). In contrast, the Texas False Claims Act more narrowly
provides that “the court’s determination of expenses, fees, and costs to be awarded . . . shall be
made only after the defendant has been found liable in the action.” See Tx. Hum. Res. Code
Ann. § 36.110(c). Therefore, the Texas False Claims Act is not at least as effective in rewarding
and facilitating qui tam actions as the Federal False Claims Act.
Section 1909(b)(4) of the Act requires the State law to contain a civil penalty that is not less than
the amount of the civil penalty authorized under section 3729 of the Federal False Claims Act.
As amended by the FERA, the Federal False Claims Act now expressly provides that its civil
penalty shall be adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990. See 31
U.S.C. § 3729(a). Pursuant to the Federal Civil Penalties Inflation Adjustment Act, a civil
penalty under the Federal False Claims Act is not less than $5,500 and not more than $11,000. In
contrast, the Texas False Claims Act provides for a penalty of not less than $5,000 or more than
$15,000 when the violation results in an injury to an elderly or disabled person and a penalty of
not less than $5,000 or more than $10,000 when the violation does not result in an injury to an
elderly or disabled person. See Tx. Hum. Res. Code Ann. § 36.052(a)(3).
Texas will be granted a grace period, ending March 31, 2013, to amend the Texas False Claims
Act and resubmit it to OIG for approval. Until March 31, 2013, Texas will continue to qualify
for the incentive under section 1909 of the Act. Resubmission to OIG of an amended act will toll
the expiration of the grace period until OIG issues a letter deeming the act either compliant or not
compliant with section 1909 of the Act. To continue to qualify for the incentive after March 31,
2013, or after the expiration of any tolling period, if applicable, Texas must amend the Texas
False Claims Act to meet the requirements of section 1909 of the Act with reference to the
Federal False Claims Act in effect on the date of this letter, submit it for review, and receive
approval by OIG. If any provision of the Federal False Claims Act that is relevant to section
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1909 of the Act is amended further, Texas will again be granted a 2-year grace period from the
date of enactment of any such amendments in which to amend its act to conform with the
amended Federal False Claims Act and resubmit it to OIG for approval.
If you have any questions regarding this review, please contact me or have your staff contact
Katie Arnholt, Senior Counsel, at 202-205-3203 or Tony Maida, Deputy Chief, Administrative
and Civil Remedies Branch, at 202-205-9323.
Sincerely,
/Daniel R. Levinson/
Daniel R. Levinson
Inspector General